Albar v. Carangdang
REITERATIONFacts
The Antecedents: Doña Rosario Fabie y Grey's will devised the naked ownership of a property in Manila to Rosario Grey Vda. de Albar, et al., and its lifetime usufruct to Josefa Fabie. The will prohibited the usufructuary from transferring her right while a minor. During liberation, the building on the property was destroyed by fire. A Chinaman offered to lease the property for five years with a monthly rental of P500.00 and to construct a new building worth P30,000.00, provided both naked owners and the usufructuary signed. A temporary compromise was reached: naked owners received 20% of the rent, and the usufructuary received 80%. The parties reserved their right to litigate their claims after the lease termination. The naked owners received P8,574.00 from the US War Damage Commission for the damaged property. The usufructuary paid real estate taxes from 1945 to 1954. Procedural History: Rosario Grey Vda. de Albar, et al. filed an action to declare the usufruct limited to legal interest on the land value and that the right to receive rentals had ceased. The trial court ruled in favor of the usufructuary, granting her exclusive right to receive all rentals, 6% interest on the war damage payment, reimbursement for taxes paid, and attorney's fees. The Court of Appeals modified this, affirming the usufruct's subsistence and the right to receive rentals and legal interest on the war damage payment, but deferred reimbursement of taxes until the termination of the usufruct and denied attorney's fees. The Petition: Petitioners (naked owners) sought review, contending the usufruct on rentals was extinguished with the building's destruction. Respondent (usufructuary) argued the usufruct covered both land and building.
Issue(s)
Whether the destruction of the building extinguishes the life usufruct on the rentals of the property. Whether the usufructuary is entitled to the legal interest on the war damage payment received by the naked owners. Whether the usufructuary is entitled to reimbursement for real estate taxes paid.
Ruling
The Court affirmed the Court of Appeals' decision in part, holding that the usufruct subsists and is in full force and effect upon the Ongpin lot and the building existing thereon. However, it modified the decision by reversing the order for petitioners to reimburse the real estate taxes paid by the respondent for the years mentioned. The Court ruled that the usufructuary is entitled to receive rentals and legal interest on the war damage payment, but the reimbursement of real estate taxes paid by the usufructuary should not be shouldered by the naked owners.
Ratio Decidendi
On the extinguishment of the usufruct: The Court held that the destruction of the building did not extinguish the life usufruct. Citing Article 603 of the old Civil Code, the Court stated that usufruct is extinguished only by the total loss of the thing subject to the encumbrance. In this case, only the building was destroyed, not the land. Furthermore, Article 517 of the Civil Code provides that if the usufruct is constituted on immovable property of which a building forms part, and the latter is destroyed, the usufructuary has the right to use the land and materials. The term "fincas" in the will, in Spanish, has a broad scope including both land and buildings. Therefore, the usufruct on the land and any improvements thereon continues. The Court also referenced Lopez vs. Constantino to emphasize that the land, being indispensable, cannot be considered as having no rental value, and the rents on the building constitute an earning of the capital invested in both land and building. On the right to interest on war damage payment: The Court affirmed the Court of Appeals' ruling that the usufructuary is entitled to the legal interest of 6% per annum on the P8,574.00 war damage payment received by the naked owners. The Court reasoned that war damage payments are intended to replace part of the capital invested in the destroyed building or to assuage the material loss of the owner. Since the usufructuary has a right to the use and fruits of the property, including the building, she is entitled to the interest on the compensation for its destruction. The majority opinion, however, noted a modification in the sense that the obligation for interest should only be valid up to the date the new building was constructed, as the new building replaces the old one. Nevertheless, the majority ultimately held that the war damage payment should also be subject to usufruct for life, allowing the naked owners to turn over the money to the usufructuary for her use during her lifetime, subject to its return after her death. On reimbursement for real estate taxes: The Court modified the decision of the Court of Appeals, reversing the order for petitioners to reimburse the respondent for real estate taxes paid from 1945 to 1954. The Court found that in a previous amicable agreement approved by the court in Fabie vs. Gutierrez David, the usufructuary (herein respondent) bound herself to pay all real estate taxes, special assessments, and insurance premiums. This agreement was to be in effect during the term of the usufruct. Therefore, the respondent voluntarily assumed the obligation to pay these taxes, and there was no valid reason for the petitioners to reimburse her.
Main Doctrine
The destruction of a building subject to a life usufruct does not extinguish the usufruct if the land remains, as the usufructuary is entitled to use the land and materials, and the usufruct extends to the land itself. The usufructuary retains the right to administer the property and collect rents, including interest on war damage payments for the destroyed building, until the termination of the usufruct.